Plus, changes at Putnam, Vanguard, and others.
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By Katie Rushkewicz Reichart, CFA | 11-26-08 | 02:50 PM | Email Article

Morgan Stanley announced management changes and proposed mergers for several of its funds Nov. 21, 2008. Pending shareholder approval, the $38 million world-stock fund  Morgan Stanley Institutional Global Value Equity  will merge into its sibling, $84 million  Morgan Stanley Institutional Global Franchise . The $207 million world-stock fund  Van Kampen Global Value Equity  will merge into  Van Kampen Global Franchise , a superior fund with nearly $1.3 billion in assets.

Katie Rushkewicz Reichart, CFA, is a senior fund analyst on the active funds research team for Morningstar.

The team that led both of the soon-to-be-shuttered Global Value Equity funds has been ousted. The departing team members, including Colin McQueen, Douglas McGraw, Martin Moorman, Alexander Vislykh, and Stephen Walker, came on board in waves between 2004 and 2008, giving them little time to mesh as a unit. Their two charges produced uninspiring records that fell roughly in line with the world-stock category average. That performance couldn't measure up to the more successful Global Franchise funds, though, led by Hassan Elmasry, Paras Dodhia, Jayson Vowles, and Michael Allison. The two Global Franchise funds, which are currently closed to new investors, sport outstanding long-term records and have topped the charts during the credit crisis. One analyst from the Global Value Equity funds is expected to stay on, and two more will be hired.

The Global All-Cap team will take over  Morgan Stanley Global Dividend Growth Securities , another mediocre world-stock fund previously managed by McQueen and company. The new team consists of Nathalie Degans, Margaret Naylor, Arthur Pollock, Alistair Corden-Lloyd, and Jean Beaubois. This team currently runs Morgan Stanley Institutional International Small Cap , a foreign small/mid-value fund that has amassed a decent track record.

 Van Kampen Enterprise  is also getting new management and a shift in strategy. The $712 million large-growth fund, which has floundered in the face of constant management turnover, will say goodbye to Feng Chang and Hooman Yaghoobi and their quant-based approach. The talented growth team, headed by Dennis Lynch and including David Cohen, Sam Chainani, Alexander Norton, Armistead Nash, and Jason Yeung, will take over, employing a fundamental strategy that focuses on strong businesses with steady cash flows. The team has a knack for successful stock-picking and has had an impressive run at several charges, including  Morgan Stanley Institutional Small Company Growth  and  Morgan Stanley Institutional Mid Cap Growth .

Finally, the London-based Quantitative and Structured Solutions group, led by Michael Nolan, Helen Krause, Arthur Robb, and Neil Chakraborty, will assume responsibility for three middling specialty funds. David Walker of the pricey and often-underperforming  Morgan Stanley Technology  and Van Kampen Technology  has been sent walking. The quant team will take over those two funds as well as  Morgan Stanley Natural Resource Development Securities , a fund plagued with turnover at the top. Mark Bavoso, former comanager of the natural-resources fund, will continue to run Van Kampen Asset Allocation Conservative , Van Kampen Asset Allocation Moderate , Van Kampen Asset Allocation Growth , and Van Kampen Leaders . The quant team is new to several other funds that changed hands earlier in 2008, including  Morgan Stanley Global Infrastructure , Van Kampen Utility , and Morgan Stanley Health Sciences , and will use a quantitative and systematic approach to picking stocks. Although an adjustment is welcomed for these funds, it's too soon to tell how the changes will play out because the new team hasn't established a track record together elsewhere.

MFS Manager Shuffle
MFS has also fired several managers, including Maureen Pettirossi from  MFS Massachusetts Investors Growth Stock . This large-growth fund has seen several changes to its leadership and investment process in the last few years. The most recent team of Pettirossi, longtime manager Stephen Pesek, and Jeffrey Constantino worked together for only two years before Pesek departed in August 2008. Constantino, who has been with the fund since 2006, is now sole manager. He continues to run  MFS Global Growth  and  MFS Massachusetts Investors Growth Stock 529 .

MFS has also said goodbye to Gregory Locraft of  MFS Total Return  and  MFS Strategic Value . Locraft worked on both funds for just more than a year and never established a solid long-term record despite previously managing MFS Massachusetts Investors Growth Stock and MFS Massachusetts Investors Growth Stock 529. Joshua Marston, who started at MFS as an analyst in 1999 and who was named director of structured/financial research in 2005, has joined Total Return's fixed-income team. Brooks Taylor will take over Strategic Value and will continue as lead manager of Total Return.

Jonathan Sage is out as comanager of MFS MidCap Value  but will continue to work on MFS Blended Research Core Equity  and MFS Diversified Income . Brooks Taylor and former equity analyst Kevin Schmitz have assumed management responsibilities.

 MFS Mid-Cap Growth  has also changed hands. Eric Weigel, who was at the helm for only a year, has left MFS. Matthew Krummell is also off this fund, although he will continue to manage MFS Blended Research Core Equity. Eric Fischman, who had a three-year stint at this fund earlier this decade and has managed  MFS Growth  since 2002, will take over with David DeGroff, who has been both a fixed-income and equity analyst since joining MFS in 1997.

Philip Robbins has gotten the ax at MFS Floating Rate High Income  after a nearly four-year run. David Cobey, who has been with the fund since 2006, will assume sole responsibility.

Finally, Benjamin Stone will join Barnaby Wiener at MFS International Value . Stone has been an equity analyst at MFS since 2005.

Another Week, Another Change at Putnam
After a spate of recent manager layoffs, Putnam announced that David King of  Putnam Convertible Income-Growth  has also left the firm. Last week, Putnam announced that it was merging King's other struggling charge,  Putnam New Value , into  Putnam Equity Income , a more successful fund led by Bartlett Geer. As of last week's announced changes, King was supposedly sticking with Convertible Income-Growth, where he had amassed a fair record since taking over in 2002. Robert Salvin, who has been comanager since early 2006, is staying put. Salvin will be joined by Eric Harthun, who comanaged the beleaguered  Putnam Fund for Growth & Income  from 2006 until November 2008.

Vanguard Adds Subadvisors
 Vanguard Morgan Growth  has added two new subadvisors to replace quant manager Franklin Portfolio Associates, LLC. This will be the first Vanguard assignment for the $4.8 billion firm Frontier Capital Management Co., LLC. Frontier senior vice president Stephen Knightly will manage Frontier's stake, following a fundamental approach that focuses on mid-cap companies. Ford Draper, Jr., president and CIO of Kalmar Investment Advisers, will manage another portion. The $2.7 billion firm has served as an advisor to  Vanguard Explorer  since 2005. The two new advisors will run approximately 20% of the $6.4 billion Morgan Growth, which boasts low fees and a decent long-term record. Wellington Management Company, LLP; Jennison Associates LLC; and Vanguard Quantitative Equity Group will continue advising the fund as well. Ousted advisor Franklin continues to manage  Vanguard Growth & Income  for now.

Open-and-Shut Cases
Small-growth fund  Buffalo Small Cap  reopened to investors Nov. 24. The fund, which has seen outflows for 13 consecutive months as the credit crisis has unfolded, is trying to raise an additional $100 million to reach a total asset base of $1.3 billion, the level at which it closed in August 2003. Despite a 40% loss for the year to date through Nov. 25, the fund has outpaced 95% of its peers and boasts experienced management, a reasonable price tag, and a solid long-term track record.

Analytic Global Long-Short  announced that it will liquidate Dec. 26. The $2 million long-short fund had a consistently poor record during its nine-year run.

Bjurman, Barry Mid Cap Growth  and Bjurman, Barry Small Cap Growth  will liquidate Dec. 8. Investors have fled the seven-year-old Mid Cap fund in droves, leading to a dwindling asset base of just $3 million. The young Small Cap fund, which was incepted in 2003, has also experienced redemptions and has $5 million in assets. The family's third fund,  Bjurman, Barry Micro-Cap Growth  , won't be shuttered but will change hands. The $93 million fund is down nearly 60% this year and has been in the small-growth basement despite an impressive 10-year record. Teton Advisers, Inc., a subsidiary of GAMCO, is replacing Bjurman, Barry & Associates as advisor. Pending shareholder approval, the fund will merge into GAMCO Westwood Mighty Mites , a $63 million small-value offering that has held up well.

Also,  Delaware Balanced , a $150 million fund that has had 19 consecutive months of net outflows, will merge into its $62 million sibling, Delaware Moderate Allocation 

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Katie Rushkewicz Reichart, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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